Designer Brands (DSW:NYS) Fundamental Valuation Report

Fundamental Valuation Report

Designer Brands(DSW:NYS)

Consumer Cyclical:Apparel Stores

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Close Price/Date
$22.99 (USD) 28/03/2019

Weighted Valuation
$25.63 (USD)

Overall Rating
Undervalued by 11.5%

Valuation Models Analyst Consensus: $25.00 (USD)
(in order of importance) Comparables: $28.28 (USD)
Adjusted Book Value: $22.21 (USD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Undervalued on a Comparable Valuation
Asset: Fairly valued on an Asset Valuation

Company Overview (DSW:NYS USD)

Price 22.99
Range 22.77 – 23.41
52 week 20.32 – 34.10
Open 22.84
Vol / Avg. 3.44M/2.87M
Mkt cap 1.8B
P/E 49.09
Div/yield 1.00/0.04
EPS -0.26
Shares 78.43M
Beta 1.13

Company Description

Designer Brands Inc is a retailer engaged in branded footwear in the United States. It offers a wide selection of brand name and designer dress, casual, and athletic footwear for women and men. Group functions through two segments: the DSW segment (DSW) and the Affiliated Business Group (ABG) segment. Its segment operates more than 400 DSW stores located in around 40 US states which include product such as kids, men’s and women’s footwear, handbags, hosiery, jewelry and other accessories whereas Affiliated Business Group (ABG) segment partners with other retailers to build and optimize footwear business and it operates nearby 300stores and e-commerce channels. The group generates revenue from the sale of footwear through both segments.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for DSW:NYS

Using a discounted cash flow model we generated an intrinsic value of $34.72 (USD) for DSW:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

DSW:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $34.72 1% 5% 1% 5%
WACC (or Ke) 11.66 $39.33 $31.06
Terminal Growth Rate 3.00 $31.52 $38.75
Tax Rate 0.03 $36.85 $32.65
Cash Flow 363,658,303 $32.37 $37.07
Capital Expenditures -82,256,400 $34.29 $35.15
Long Term Debt 0 $34.72 $34.72

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $17.85 (USD) for DSW:NYS. We also generated a valuation of $28.28 (USD) using other metrics and comparables.
The comparable companies were American Eagle Outfitters (AEO:NYS) and Urban Outfitters (URBN:NAS).

Company DSW:NYS End Date Value
Earnings/Share ($0.26) (USD)
Book Value/Share $12.02 (USD)
Sales/Share $37.51 (USD)
Cash Flow/Share $2.45 (USD)
EBITDA/Share $1.15 (USD)
Price Based on Comps Adjustment Factor (%)
($3.77) (USD) -29.1
$29.73 (USD) -32.4
$33.26 (USD) -21.7
$18.24 (USD) -1.2
$6.70 (USD) 11.5
DSW:NYS Ratios Used Average Values AEO:NYS URBN:NAS
65.80 PE Ratio 14.49 13.08 15.90
2.46 PB Ratio 2.47 2.72 2.23
0.79 PS Ratio 0.89 0.91 0.87
12.07 PCF Ratio 8.25 8.10 8.40
10.00 EV to EBITDA 5.82 6.01 5.63


Using a multiples approach we generated a valuation of  $21.08 (USD) for DSW:NYS

Company DSW:NYS End Date Value
Earnings/Share ($0.26) (USD)
Book Value/Share $12.02 (USD)
Sales/Share $37.51 (USD)
Cash Flow/Share $2.45 (USD)
EBITDA/Share $1.15 (USD)
Price Based on Comps Adjustment Factor
$0.00 (USD) 0
$24.71 (USD) 0
$27.67 (USD) 0
$24.04 (USD) 0
$7.91 (USD) 0
Ratios Ratio Average
PE Ratio 20.16
PB Ratio 2.06
PS Ratio 0.74
PCF Ratio 9.80
EV to EBITDA 6.87

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  DSW:NYS for the last 10 years was  2.09

We ran the Adjusted Book Value for  DSW:NYS and generated a book value of  $10.62 (USD)
By multiplying these we get an adjusted valuation of  $22.21 (USD)

Analyst Data

In the Stockcalc database there are 1 analysts that provide a valuation for DSW:NYS. The 1 analysts have a concensus valuation for DSW:NYS for 2020 of $25.00 (USD).

DSW:NYS Designer Brands

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
0 1 0 3.0000 Hold 2019-3-27

Current Price: 22.99 USD

Analyst Consensus
USD Millions 2020 2021
Mean EPS 1.82 2.00
# EPS Analysts 1 1
Mean Revenue 3,595.10 3,679.50
# Revenue Analysts 1 1
Mean Target Price 25.00
Mean Cash Flow
Mean EBITDA 305.00 325.60
Mean Net Income 147.50 161.10
Mean Debt Outstanding
Mean Tax Rate 27.00 27.00
Mean Growth Rate
Mean Capital Expenditure

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.
The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).
The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.
With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.
If we have Analyst coverage for the company we use the consensus target price here.

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